Update on the Revised Fiscal Year 2020–21 Budget

The Revised Fiscal Year 2020–21 Budget Adopted by City Council

On October 26, 2020, the City Council unanimously approved the Revised Fiscal Year 2020–21 Budget. The Revised Budget continues the City’s longstanding practice to support the City’s financial health, while striving to address critical needs in light of the COVID-19 pandemic, to advance multi-year City Council priorities, and to focus on equity and sustainability.

This Blog post provides insight into the City’s long-term fiscal sustainability, reimagining public safety services, and new revenue generation through retail cannabis.

Strengthening the City’s Long-Term Fiscal Outlook

The City has a history of taking intentional, proactive, and strategic steps to ensure the long-term fiscal sustainability of the City, including adopting a structurally balanced annual budget, funding long-term needs, and maintaining a 15 percent General Fund reserve level.

Last year, the City Council’s Finance/Audit Subcommittee took an active role in providing guidance and recommendations to staff and the City Council on strategic financial initiatives. This included helping staff develop a community Budget Workshop to engage community members on the City’s budget. The interactive workshop gave residents the opportunity to learn about City finances and suggest potential operational innovations and efficiencies, cost reductions, and new revenue sources without raising general taxes.

With this feedback, the City Council encouraged staff to proceed with retail cannabis and a business license tax. While the business license tax was explored in late 2019/early 2020, it was deferred to explore alternative approaches for contributions from the business sector. For retail cannabis, a four-phased approach to implementing regulations to allow for various types of commercial cannabis businesses within the City was developed (more information below).

The Subcommittee also assessed opportunities to shorten the timeframe for paying off pension liabilities quicker and the City Council approved an 18-year payoff period to reduce total interest payments.

Reimagining Public Safety Services

Fire and Police services have evolved significantly over the years and it is appropriate to take a fresh look at how we use these critical resources available to the community 24/7. We need to analyze calls for service and consider tradeoffs in new service models.

Police Department ($2.5 million budget reduction)

Since June, the City Council Ad Hoc Committee on Policing and City staff have been busy listening, learning and leaning in on ways to advance racial equity, including reviewing policies and researching best practices relating to municipal policing.

One of the key recommendations from the community regarding these issues has been to explore alternatives to police officers responding to mental health crisis calls by considering the deployment of mental health clinicians in partnership with police officers or instead of police officers when possible.

The Revised Budget includes funding for a Pilot Program in partnership with San Mateo County and other cities, which would launch in the first quarter of 2021. The agencies intend to partner with the John Gardner Center for Youth and the Families at Stanford University to establish research measures and report on program effectiveness.

City Council Equity and Social Justice Sub-Committee and a Police Advisory Committee
After taking in community feedback on policing and equity issues, the City Council Ad Hoc Committee on Policing continued to meet to discuss how the City Council and community members can continue to be involved in these issues. On October 26, the Ad Hoc Committee recommended, and received conceptual support, for the formation of a City Council Equity and Social Justice Sub-Committee, and a Police Advisory Committee. The City Council Committee would be appointed by the Mayor and the Police Advisory Committee would be appointed by the Council. Final details are now in development; however, conceptually, the Police Advisory Committee could provide input on policing policies and activities, and feedback on the mental health program currently being created with the County of San Mateo and Cities of Daly City, San Mateo, and South San Francisco. Police Advisory Committee members would be selected with an eye toward broad community representation, would ensure that the community remains engaged as we proceed in strengthening the transparency and accountability of our police department, and would report to the City Council. The City Council Equity and Social Justice Sub-Committee would review these efforts over time, and would consider opportunities for a City Commission on Equity as the Equity Workplan is developed. Formal consideration of both these recommended committees will be coming forward to the City Council in the future.

Fire Department ($2.05 million budget reduction temporarily offset with reserves)

Fire Department bargaining units will be meeting with City staff over the next few months to identify necessary expenditure reductions, while avoiding a brown out of Engine 9, which may include reducing administrative costs and/or modifying staffing and scheduling practices. Staff expects to return to the City Council early next year with an alternative that reduces costs within the department, and, in the meantime, we are committing approximately $500,000 in reserve funds to avoid regular brownouts of Engine 9.

New Revenue Generating Model: Retail Cannabis

Building upon the community feedback to increase revenue without general taxes, the City developed a four-phased approach to implementing regulations to allow for various types of commercial cannabis businesses within the City.

The City sought input from the community help guide this process and data received was compiled by an independent consultant, and the overall results were used to provide feedback to the City Council.

On October 26, 2020, the City Council approved amendments to the Redwood City Zoning Ordinance to allow cannabis storefront retail, and amendments to the City Code to regulate cannabis storefront retail and update operating requirements for cannabis businesses.

In summary, the City Council supported the following recommendations:

• Allow up to six (6) storefront cannabis retailers — this would allow for sustainable business operations, avoid clustering and avoid impacts on other retail businesses
• Allow storefront cannabis retailers to also conduct deliveries
• Classify retail cannabis similarly to general retail — this would permit these businesses to be located in all of Redwood City’s Zoning Districts by right that already permit general retail
• Continue the 600-foot buffer from sensitive uses
• Process retail business applications through a merit-based process conducted by staff

The City’s consultant, HdL, a recognized local government consulting firm with expertise in cannabis permitting policy, provided preliminary revenue projections based on certain assumptions, data and market trends. Based upon the City Council’s action to tax non-storefront and retail cannabis sales at 4%, it is anticipated that the City could receive up to $1.3 million annually. This new revenue was not assumed in the Revised Budget, as City Council had not yet taken action to approve storefront retail, but will be a key new revenue stream as we can expect to be grappling with significant economic impacts for the next several years due to the COVID-19 pandemic.

Learn more by visiting www.redwoodcity.org/cannabis